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Gold/Mining/Energy : Strictly: Drilling and oil-field services
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To: jim_p who wrote (66376)5/17/2000 3:04:00 PM
From: Michael Young  Read Replies (2) of 95453
 
<<One thing that we have not talked about is how funds operate. The oil and gas sector is very small today compared to other sectors. Most of the funds are managed by an asset fund manager, who selects the stocks he wants to invest in.>>

Great point. Also consider that the natural resource sector funds are going to start attracting big cash inflows in the near future, simply because they have been the best performing funds recently. They will have to put that money to work. Mutual fund managers aren't paid to stay in cash.

Of course, these stocks don't trade like techs, even the racehorses in the OSX. They need to back and fill. Five to ten percent corrections can occur at any time.

When will the top be approaching? The obvious answer is when oil and gas prices significantly weaken. But that isn't the entire answer. If the group is still underowned, a pullback in energy prices won't hurt much, since everyone acknowledges that oil in the twenties will lead to increased production. However, when the group becomes overowned it won't take much "bad" news to cause a stampede of selling.

I'd wait till I see the momo fund managers come on TV constantly touting these stocks before I'd be worried about the group being overowned - a la summer 1997. We aren't seeing that yet. Most of them are too worried about their tech positions to really get involved in the energy names - yet.

MIKE
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